more upside after the Fed and BOE rate decisions

The GBP/USD price wavered on Friday morning as investors reacted to the latest interest rate decisions by the Federal Reserve and the Bank of England (BOE). The pair is trading at 1.3160, where it has been in the past few days. 

BOE and Fed decisions

The Federal Reserve concluded its monthly meeting on Wednesday and decided to hike interest rates for the first time since 2018. 

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As expected, it raised rates by about 0.25% and hinted that more rate hikes were coming. Precisely, Jerome Powell warned that the bank will boost rates in all remaining monetary policy meetings. 

The bank attributed the change of tone to the rising inflation in the US and the fact that the unemployment rate has pulled back a bit in the past few months. Data published earlier this month revealed that the country’s unemployment rate fell to about 3.8% in February. 

Meanwhile, the Bank of England (BOE) also concluded its monetary policy meeting on Thursday and did something it hasn’t done in more than a decade. The Andrew Bailey-led bank decided to hike interest rates by 0.25%. It was the third straight meeting that the bank has raised rates.

Nonetheless, the GBP/USD pair dropped initially because the decision was a bit dovish citing the ongoing crisis in Ukraine. It also said that future rate hikes will depend on medium-term prospects for inflation. It expects that inflation will rise to 8% in Q2. The bank added:

“Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the United Kingdom, is likely to slow.”

GBP/USD forecast 

The four-hour chart shows that the GBP/USD pair has been in a tight range in the past few days. It is trading at 1.3157, which is slightly above this week’s low of 1.3090.

The pair has also moved slightly above the 25-day and 50-day moving averages. A closer look shows it has formed a small inverted head and shoulders pattern. 

Therefore, there is a likelihood that the GBP/USD pair will break out higher in the short term. The next key support level to watch will be the 50% Fibonacci retracement level at 1.3325.

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